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Editor's Note: Mike Ruppert has had an incredible evolution. As an ex-LAPD narcotics officer, he_blew the whistle on the CIA’s drug dealing operations in the 1980’s. In the 90’s, Ruppert started From the Wilderness, a groundbreaking investigative web site that has become a home for some of the Internet’s most thought-provoking investigative journalism.

After 9/11, Ruppert gained underground hero status for pointing out the glaring discrepancies between the administration’s official story and what really happened – increasingly becoming convinced there was high-level complicity in the terror attacks.

The mainstream press in the U.S. ignored him, and many on the left, most notably The Nation’s David Corn openly attacked him, stating, “Ruppert is not a journalist,” in one of two scathing articles. _

Then in the spring of 2002, something began to happen - gapping holes in the official 9/11 narrative began to be covered by the mainstream media. It was widely reported that the FBI's Minneapolis office was refused permission to search the laptop of the so-called 20th hijacker Zacarias Moussaoui, who was arrested after trying to learn how to fly, but not land, a 747. Agent Coleen Rowley wrote in a memo_he was the "type of person that could fly something into the World Trade Center." The so-called Phoenix memo also leaked - a July 2001 FBI report that warned bin Laden operatives might be taking fight training in the U.S. so that they could launch terrorist attacks on American targets. They were both ignored. Numerous other warnings from domestic and foreign intelligence agencies were reported, including an August 2001 CIA report that stated bin Laden was planning a major attack. In May 2002, Rupert Murdoch’s New York Post blared, “Bush Knew.”

But by the fall, the administration began to beat the drums of war against Saddam, and the unanswered questions about 9/11 conveniently disappeared into the media ether.

The invasion was successful, but as post-invasion Iraq became bogged down in a bloody quagmire the administration was accused of widespread deception about the rationale for war._As CNN’s Christine Amanpour said yesterday in a blistering interview on MSNBC, there was “disinformation at the highest levels." The mainstream media began to turn once again.

Now, on the second anniversary or 9/11, many of the same questions Mike Ruppert was chided as a “conspiracy theorist” for raising are being brought to the table. Even once compliant widows of 9/11 victims are_pushing for answers, and accusing the administration of a cover-up.__

Mike Ruppert has re-emerged (he’ll tell you he never went anywhere) and re-doubled his efforts. Today, he is focusing on the big picture – the real reasons behind the so-called War on Terror. As everyone from economist Jeffrey Sachs to ex-British MP Michael Meacher agrees – it all comes down to oil.

Recently, Ruppert had an extraordinary conversation with one of the biggest players in the oil business, confirming much of what he has been writing about. He has generously allowed us to reprint it here (subscribers to his web site had it weeks ago). If you value this type of reporting, we urge you to subscribe to From the Wilderness:

Behind the Blackout

An Energy Investment Banker and Bush Energy Advisor Gives Unexpected Answers on the Northeast Power Grid, Peak Oil and Gas, and Much More

Matthew Simmons is the CEO of the world's largest Energy Investment Bank, Simmons & Company International. Its clients include Halliburton; Baker, Botts, LLP; Dynegy; Kerr-McGee; and the World Bank. Since 1993, it has underwritten or financed 18 transactions valued at more than $350 million. Of those, six were valued at more than $1 billion. Simmons is a member of the Council on Foreign Relations and serves on the National Petroleum Council's Natural Gas Task Force. He has a lot to say about the Northeast power grid blackout, its causes, and what they imply for the future. He also has a lot to say about Peak Oil and Gas.

Surprisingly, and with remarkable candor flowing from a sense of urgency he communicates at every one of his presentations to global energy experts, Simmons delivers a message that sounds more like a Democratic "New Deal" plank than a Republican Party free-market love fest. He is an arch foe of economists who insist that investment and technology will solve what he and a growing number of energy industry experts call an unsolvable and permanent decline in hydrocarbon energy resources.

Deregulation was the primary cause of the failure on Black Thursday, August 14. But, as far as Matt Simmons is concerned, to stop there and pretend everything is okay if only more infrastructure is built borders on suicidal behavior.

Matt Simmons will be the first to tell you that what he says has nothing to do with politics and everything to do with survival. He is a man of seeming contradictions by virtue of his opposition to the environmental movement on the one hand and his absolute dislike of energy deregulation in the 1990s on the other. There are very few who have interacted with him from any camp who doubt either his honesty or his sincerity. For that reason alone, what this insider has to say about the Northeast Power Grid collapse deserves our fullest attention. His words carry weight in Washington and around the world. Black Thursday was, he says, only the beginning.

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FTW interviewed Simmons via telephone from his home in Rockport, Maine on August 18, 2003

FTW: What's the most important thing you want the American people to know about Black Thursday?

SIMMONS: This blackout ought to be an incredible jolt telling us about a host of energy problems that are ultimately going to prevent any future economic growth. It's like people have been ignoring annoying phone calls and living in denial about a problem that won't go away. It's like the ghost of Enron calling. The event itself was astonishing. Senior people like Governor Pataki or the head of NERC [North American Electric Reliability Council] were asking how this could happen. But the problem was inevitable. The only thing we didn't know was when it would happen.

FTW: What did happen?

Simmons: On a large scale what happened was deregulation. Deregulation destroyed excess capacity. Under deregulation, excess capacity was labeled as "massive glut" and removed from the system to cut costs and increase profits. Experience has taught us that weather is the chief culprit in events like this. The system needs to be designed for a 100-year cyclical event of peak demand. If you don't prepare for this, you are asking for a massive blackout. New plants generally aren't built unless they are mandated, and free markets don't make investments that give one percent returns. There was also no investment in new transmission lines.

Underlying all this is the fact that we have no idea how to store electricity. And every aspect of carrying capacity, from generators, to transmission lines, to the lines to and inside your house, has a rated capacity of x. When you exceed x, the lines melt. That's why we have fuse boxes and why power grids shut down. So we have now created a vicious cyclicality that progresses over time.

Another problem was that with deregulation, people thought that they could borrow from their neighbor. New York thought it could borrow from Vermont. Ohio thought that it could borrow from Michigan, etc. That works, but only up to the point where everyone needs to borrow at once and there's no place to go.

A second major reason is that decisions were made in the 1990s that all new generating plants were to be gas fired. We've had a natural gas summit this year and, as you know, I have been talking for some time about the natural gas cliff we are experiencing. Many thought that this winter would be deadly, and I have to say that it's just a miracle that we have replenished our gas stocks going into the cold months. This winter could have been a major disaster. We've seen a price collapse in natural gas to the five to eight dollar range (per thousand cubic feet) and the only reason that happened was throughout almost the entire summer there were only a handful of days when the temperature rose above eighty degrees anywhere. That was miraculous. It allowed us to prepare for the winter but we shouldn't be optimistic. One good hurricane that disrupts production, one blazing heat wave, one freezing winter after that and we're out of solutions.

FTW: And natural gas too?

Simmons: Well, I know you understand it, but people need to understand the concept of peaking and irreversible decline. It's a sharper issue with gas, which doesn't follow a bell curve but tends to fall off a cliff. There will always be oil and gas in the ground, even a million years from now. The question is, will you be a microbe to go down and eat the oil in small pockets at depths no one can afford or is able to drill to? Will you spend hundreds of thousands to drill a gas well that will run dry in a few months? All the big deposits have been found and exploited. There aren't going to be any dramatic new discoveries and the discovery trends have made this abundantly clear.

We are now in a box we should never have gotten into and it has very serious implications. We also see the inevitable issues that follow a major blackout: no water, no sewage, no gasoline. The gasoline issue is very important. Our gasoline stocks are at near all time lows. With the blackout, more than seven hundred thousand barrels per day of refinery capacity were shut down. People were told to boil their water. So what do they do, they go to their electric stove which isn't working. What then?

FTW: Makes you wonder about France and the heat wave that has killed 5,000.

Simmons: The only reason Europe was spared a far worse blackout than what hit the USA was that Europe barely uses air conditioning. In fact, even though America uses a lot of air conditioning some areas have become fairly efficient in the ways they use it. Quantitatively, we use more energy because there are more of us. But air conditioning is a relatively new experience in Ontario, Canada. Until recently Ontario had been a net energy exporter. They have a population of just over 12 million. With air conditioning in the last five years, Ontario became a net importer of electricity. Now, on just a normal hot summer day, Ontario's peak power use averages about 23,000 Gigawatts.

Texas, with a population of 25 million, set an all time record of 60,000 Gigawatts just a week before the blackout. The difference is that except for one tiny line running into Arkansas, Texas is self-contained for electricity. It's not tied to any other users. As we saw on Black Thursday, Ottawa was part of a whole interlocking system that had no place to go but down.

FTW: So how big a factor was the weather?

Simmons: It was THE factor in my opinion. To show much weather determines power use, in the week of August 3rd, the US set an all-time national record for electricity use of 90,000 Gigawatts. The Mid-Atlantic States' use of power had jumped 29.5% over last year and 20% over just the previous four weeks. Why? The temperature had been as hot as we experienced on Black Thursday. If you want to compare it to vehicles and roadways, air conditioning is the interstate highway system and the Internet is the equivalent of SUVs. Everything that happened on August 14 started in the 17th hour. (5 PM at various local times). That's when everything is running at once: industrial, residential, and commercial. This is when demand peaks regardless of the weather. And we know that in hour 17 on that day the US experienced all-time peak energy use. That's when the system tripped out.

FTW: So we have two basic camps saying that the problems are generating capacity and transmission lines, without addressing feedstock issues. What about the advocates for deregulation who argued that there would be more generating capacity as a result?

Simmons: History answers that one. Following the 1965 blackout when NERC was created there was a mandate that publicly owned and regulated power providers had to build new plants. Every five years, ten per cent was added to the generating base. As deregulation was implemented in the 1990s, it was argued that it would open up vast quantities of energy in neighboring states. In the first five years of the decade, only four per cent capacity was added over the entire period. In the second five years, only two per cent was added.

In the summer of 1999, we had thirty consecutive power events which unleashed the single biggest construction boom in history which built 220 thousand megawatts of new plants at a capitalization cost of six to seven hundred thousand dollars per megawatt. Ninety-eight per cent of those plants were gas fired.

It was decided to use solely natural gas plants for several reasons. Coal fired plants took five to seven years to build. They are very dirty environmentally and the permit process is difficult. We have built on all the available hydroelectric sites we can build on. Nuclear is unpopular and expensive. Oil fired plants are remnants of the days when oil was cheap. Those days are not coming back because Peak Oil is with us now. Besides that, oil fired power plants are about the least efficient use of a barrel of oil that I can imagine. That left natural gas and the economists mistakenly presumed there would be large supplies. But natural gas plants were built with no supplies. Synthetic contracts were used, Enron-style, to sell gas futures when the gas didn't necessarily exist.

FTW: Assuming that there was enough feed stock to run the new plants how much building are we talking about?

Simmons: Each state would need to build forty to fifty per cent excess capacity. A forty per cent cushion merely provides the chance to withstand a day of high summer heat and the chance to grow by about 3% per year for three years.

FTW: Yet even if we re-regulate there are still going to be problems with feed stock to power the plants. How serious is that?

Simmons: Someone's going to be left holding the bag big time. If natural gas consumption surges in ten days of excessive heat then it would require almost a complete shutdown of industrial consumption to compensate and protect the grid. As I have been reporting for years now, there isn't going to be enough gas to run those plants, let alone new ones.

FTW: You mean shut down the economy for ten days to keep people from cooking?

Simmons: Yes.

FTW: Everyone keeps saying that ANWR (The Arctic Natural Wildlife Reserve) is the answer if we drill there. Is it?

Simmons: ANWR is not "The Answer." However, it makes great sense to develop. Drilling there should not have a negative impact on the coastal plains of the Arctic. With great luck, it could create between 300,000 and possibly up to 1.5 million barrels of oil a day and lots of natural gas that could last a decade or two. But this does not become the sole answer. On the other hand, if ANWR is kept off limits, it becomes no answer.

FTW: What about imports of natural gas from overseas? Russia and Indonesia have huge reserves; Canada, as the Canadians are painfully aware, is almost depleted when it comes to natural gas.

Simmons: Indonesia's gas fields are very old. Its Natuna gas fields, a source of stranded gas that gets discussed all the time has 95% CO2 and apparently costs about $40 billion to develop a mere 1 bcf/day of dry gas. Russia has four old fields that make up over 80% of their gas supply and they all are in decline. Canada's decline problems are as serious as the US.

FTW: Windmills? Solar?

Simmons: There's no way they can replace even a portion of hydrocarbon energy.

FTW: Reducing consumption?

Simmons: Reducing consumption has to happen, but many of the favorite conservation concepts make little overall difference. The big conservation changes end up being steps, like a ban on using electricity to either heat water or melt metals and instead, always using the "burner tip of natural gas". The latter is vastly more efficient, the energy savings are enormous and we need lower ceilings and smaller rooms. We need mass transit, and to eliminate traffic congestion. Finally, we need a way to keep people from using air-conditioning when the weather gets really muggy and hot at same time. The strain this puts on our grid is too overwhelming.

We also must begin to use our current discretionary power during the nighttime. All of theses steps are hard to implement but they make a difference.

FTW: What is the solution?

Simmons: I don't think there is one. The solution is to pray. Pray for mild weather and a mild winter. Pray for no hurricanes and to stop the erosion of natural gas supplies. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it's a certainty.

FTW: On that cheery note let's take a look at oil supplies.

Simmons: Currently, oil supply issues are as serious as the electrical grid. Last month the IEA (International Energy Agency) updated their database. They had for years been talking about a coming huge surge in non-OPEC supply, excluding the FSU (Former Soviet Union). It hasn't happened. We have the highest oil prices in 20 years and even great technological advances have not had a measurable impact on discovery or production.

FTW: I have recently noted the speed with which the Chad-Cameroon pipeline was built and switched on. Chad only has estimated reserves of around 900 million barrels (World consumption is I billion barrels every 12 days). I see a sense of urgency there.

Simmons: It's amazing. What's that pipeline going to pump, fifty thousand barrels per day? That figure may go up, but it's inconsequential in the long run. It's a sign of how strapped world supplies really are and that we may be finding out that we are already over the peak.

FTW: What about Iraq and Saudi Arabia? We have been following Iraq closely and all the sabotage, infrastructure damage and the pipeline bombings are actually reducing Iraqi capacity. That leaves Saudi Arabia with 25% of known reserves.

Simmons: I have for years described two camps: the economists who told us that technology would always produce new supply and the pessimists or Cassandras who told us that peak was coming in maybe fifteen or twenty years. We may be finding out that we went over the peak in 2000. That makes both camps wrong.

Over the last year. I have obtained and closely examined more than 100 very technical production reports from Saudi Arabia. What I glean from examining the data is that it is very likely that Saudi Arabia, already a debtor nation, has very likely gone over its Peak. If that is true, then it is a certainty that planet earth has passed its peak of production.

What that means, in the starkest possible terms, is that we are no longer going to be able to grow. It's like with a human being who passes a certain age in life. Getting older does not mean the same thing as death. It means progressively diminishing capacity, a rapid decline, followed by a long tail.

FTW: What about people like Alan Greenspan and popular writers who tell us that there is no basic problem with energy supplies? Others offer us hydrogen, which is laughed out of hand by people who have looked at its feasibility and efficiency.

Simmons: Basically they just don't get it. Some of them have gotten lazy. They were so carried away by the arguments of the economists that they stopped doing their homework. Month by month, and year by year, events are proving them systematically and thoroughly incorrect. They just don't get it. Right now, there is a deluge of stories on the wonders of hydrogen. This is another area of great confusion. Hydrogen is not a primary source of energy. For a Hydrogen Era to occur you need an abundance of natural gas, or you need to create a great deal of new power plants using coal and nuclear power. What I find so ironic about our very serious energy problems is that they started in Santa Barbara in 1969. This was where the best work was being done to create a new technological evolution in our ability to recover energy from deep water sources. Then we had a tragic spill. This gave birth to the environmental movement. It began the war between modern energy and environmental "anarchists". They have worked overtime to shut down our access to areas that might have diversified our energy supply. Had we been able to develop these areas, then we would have more options now to ensure a continuation of the economic prosperity we take so much for granted. And there is no better friend of the environment that economic prosperity.

FTW: But peak oil is peak oil, is it not? Aren't we just talking about something that would have delayed the inevitable for a few years? It would take a couple of years to drill and pipe out of ANWR but there's only a two year (total US) supply of gas there at best, and even less oil. Then what? At the ASPO conference in Paris, I think it was you or another expert who disclosed that four out of five very expensive deep water holes were coming up dry?

Simmons: Peaking of oil and gas will occur, if it has not already happened, and we will never know when the event has happened until we see it "in our rear view mirrors."

FTW: Is it time for Peak Oil and Gas to become part of the public policy debate? Simmons: It is past time. As I have said, the experts and politicians have no Plan B to fall back on. If energy peaks, particularly while 5 of the world's 6.5 billion people have little or no use of modern energy, it will be a tremendous jolt to our economic well-being and to our heath -- greater than anyone could ever imagine.

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After I ended the interview, I recalled something that I had read recently in a book called "Contraction and Convergence - The Global Solution to Climate Change." It was a startling revelation that since 1950 there has been a near perfect correlation between the growth in world GDP and the emission of greenhouse gases (i.e. - the consumption of hydrocarbon energy). In an economic system that is predicated first and foremost on perpetual growth, Matt Simmons' statement that we are no longer ever going to grow took on a whole new meaning.